Lincolnburrows:

You must wait for a bank. Why not go into a partnership with someone. I will be willing to listen to your ideas.

I sent you a mail Pls. Or should I drop my number here.

amicable09:

I agree with you on the electronic IOU system you mentioned but saying the money can only be withdrawn in tranches of 100k after crediting customer's account with 1mn is dependent on the facility structure. We can disburse 1mn at once and we can disburse also in tranches, you should look at the dynamics of the transaction, very important! that's what informs disbursement.

And servicing the interest before paying back the principal is the bank giving the customer moratorium on principal which is not a bad thing. Like I said before , no two credits are the same. When I look at a customer's cash flow, I see different things, and my calculations are very different from the borrower's calculations. Our thinking different as well. So, if from a borrower's cash flow I deduce that he won't be able to service the principal portion of the loan from the first month, it's only wise I give him that 'grace' . It is called moratorium. That's all. It makes business sense.

Well said!
That example is not meant to serve as a general rule. I agree with you that there are a million-and-one ways a facility can be structured, however, you will also agree with me that the banks always structure these transactions to retain the upper hand. This includes deducting fees and charges upfront from the principal before releasing it to the customer.
A Moratorium is a period of delay. The reason behind the demand for collecting the interest first is because in the event of a disagreement, the interest is always the first casualty. You rarely find disputes over the principal. And as you are aware, in ALL LOAN TRANSACTIONS, the Banks always reserve the right to vary the interest rate without recourse to the customer. There is some sanity in the microfinance sector but with an upper limit of 3.5m, its a needle in a haystack.
Ps: You are also correct on the issue of calculations. Banks use a zigzag form of compound interest to arrive at higher figures while most customers use simple interest for their calculations. That's why our bank loans are only suited for short-term, high-risk, high-return transactions. Anyone thinking long term should look for funding elsewhere.

NnamdiN:
Bank loan is like the devil's gift, weta isi bia welu isi I need one but God forbid I approach Nigerian banks for loan.

Hahahahahahaha @weta isi bia welu isi..... I feel u bro

amicable09:

I agree with you on the electronic IOU system you mentioned but saying the money can only be withdrawn in tranches of 100k after crediting customer's account with 1mn is dependent on the facility structure. We can disburse 1mn at once and we can disburse also in tranches, you should look at the dynamics of the transaction, very important! that's what informs disbursement.

And servicing the interest before paying back the principal is the bank giving the customer moratorium on principal which is not a bad thing. Like I said before , no two credits are the same. When I look at a customer's cash flow, I see different things, and my calculations are very different from the borrower's calculations. Our thinking different as well. So, if from a borrower's cash flow I deduce that he won't be able to service the principal portion of the loan from the first month, it's only wise I give him that 'grace' . It is called moratorium. That's all. It makes business sense.

I think I've had a practical experience on this. When a particular customer was given loan, as in crediting his bank account with the loan, based on the dynamics of the business agreement, the customer was supposed to use the loan to by raw materials, produce, sell the finished products and pay back the money on sale to the account to service the loan(it's a manufacturing firm)
Later on the bank discovered some discrepancies in the way the customer was handling the loan. The customer was taking more money than the value of raw materials bought. This eventually affected the amount of raw materials produced, affecting sells, income and the amount payed back in servicing the loan.
The bank had to modify the business arrangements and limit the amount the customer can withdraw out of the account at a time and it must be equal to the value of purchased raw materials before he can be allowed to withdraw again.

govmentson:
I think the interest rate to service the loan is too high..how do u expect an SME to make such profit and pay

I don't know much about banking, but I thought the FG through CBN set the general interest rate on loans. There might be others factors involved which I feel the op can throw more light on

vanvick247:


Hahahahahahaha @weta isi bia welu isi..... I feel u bro

those people no be am at all.

amicable09:

Nah! I beg to disagree.

Before now, a bank I know used to accept personal and corporate guarantees as part of security but now they don't. Forget the whole third party thing, I personally won't accept third party collateral. It's as simple as that. Your trustees notarized statement of net worth sef is nothing.

You must at the very least provide adequate collateral cover before you can drawdown.

I understand the third party collateral, corporate guarantee and all might be a bit difficult to get bank loan these days but that's not to say if U can't get other lenders on a collateral that covers over 150% of ur total exposure. For instance, I am owing Access bank 300million and my collateral is worth 850 million and I need 300million more. Gtbank is willing to give me 150 and Standard Chartered is also offering 150. To get both banks on my security, all I need do is employ the service of a trustee. It is only normal for Access bank to refuse my request in my individual capacity but with the service of a trustee, they CANNOT REJECT MY REQUEST & not just that, I'd bring in additional lender if I need more more based on the value of the security

LyfeJennings:


I understand the third party collateral, corporate guarantee and all might be a bit difficult to get bank loan these days but that's not to say if U can't get other lenders on a collateral that covers over 150% of ur total exposure. For instance, I am owing Access bank 300million and my collateral is worth 850 million and I need 300million more. Gtbank is willing to give me 150 and Standard Chartered is also offering 150. To get both banks on my security, all I need do is employ the service of a trustee. It is only normal for Access bank to refuse my request in my individual capacity but with the service of a trustee, they CANNOT REJECT MY REQUEST & not just that, I'd bring in additional lender if I need more more based on the value of the security

Oh! I know about this very well. But what's with the upper case 'cannot reject my request' , Lol. Don't be too sure. That's all I will say.

There's something called 'First Loss Payee' and 'Superior charge', by my association with guys in Legal department I understand these things. We have no problem with sharing asset with another bank but it is not as easy as you have written it. There's more to it than meet the eye. I won't accept such collateral except I will have Superior charge over the asset and mind you, it must be perfected!

Rainmaker69:


Well said!
That example is not meant to serve as a general rule. I agree with you that there are a million-and-one ways a facility can be structured, however, you will also agree with me that the banks always structure these transactions to retain the upper hand. This includes deducting fees and charges upfront from the principal before releasing it to the customer.
A Moratorium is a period of delay. The reason behind the demand for collecting the interest first is because in the event of a disagreement, the interest is always the first casualty. You rarely find disputes over the principal. And as you are aware, in ALL LOAN TRANSACTIONS, the Banks always reserve the right to vary the interest rate without recourse to the customer. There is some sanity in the microfinance sector but with an upper limit of 3.5m, its a needle in a haystack.
Ps: You are also correct on the issue of calculations. Banks use a zigzag form of compound interest to arrive at higher figures while most customers use simple interest for their calculations. That's why our bank loans are only suited for short-term, high-risk, high-return transactions. Anyone thinking long term should look for funding elsewhere.

When I first got this mention, I took time to digest it and couldn't help but sense some suspicions around your career. It is possible you've had a stint in the financial services industry or are still very much in the industry. For that reason, I didn't want to rush my response because there must be something new we can learn from each other.

Let's go over that your "in all loan transactions" banks have the right to vary interest rate without recourse to the borrower... I don't know about other banks and I've not seen their offer letters but I've written CAM and I've done a few offer letters, I know that when it comes to pricing we always state it clearly that "it is subject to market conditions" so the customer is aware and if anything happens, we notify them in writing.

That's informing them beforehand.

MT:
I am more interested in the risk management process that banks undertake. It seems straight jacket to me.....to me it is just about looking for the worth of collateral that matches the loan being sourced . That sounds so simplistic. Trying to determine if a bank should finance a business idea in a country like Nigeria that lacks empirical , reliable data can not be considered as part of the risk management process. I stand to be corrected if you do have a contrary opinion.

Another thing is not every one can produce physical collateral. Why cant bank evolve a kind of credit rating as obtainable abroad where loan can be given without necessarily asking for physical collateral ?. And we all know that once the credit rating is ruined, the person wont be eligible to any credit from any banks again.

Then i am certain the high interest rate charged on the loan will kill the business faster than the loan itself. Just my 2 cents.

Hi, we have credit bureaus in Nigeria. Customers are rated by these credit agencies. From what I know, at least two independent credit bureau will conduct a search including CBN before we proceed with the transaction. We've had instances where a customer with a bad loan is told that they leave us no choice but to give their details to CBN and that's not good because once they have a reported bad loan, automatically they are unable to access loans from other bank's until they are cleared.

Another thing, collateral must not always be a physical thing. There are many other things people use. Some even offer share certificates as collateral.
The way you see it is not how it is. Don't think once you can afford to give a bank some plots of land somewhere they will grant your request. It's more complicated than that.

Credit Risk Management though is interesting.

govmentson:
I think the interest rate to service the loan is too high..how do u expect an SME to make such profit and pay

I don't understand when people say interest rate to service loans are high. They are not.

SME right?
Instead of term loans, why don't they request for an OD line? There's what we call borrowing cause and borrowing purpose, they are both different. You sit with young business owners and ask them what they want and they go LOAN!

I met one today. 'Young man open an account with us'. His reply, "Will your bank give me loan?" and in my head I don't understand, loan? what for? Yes, an overdraft is a loan too but when you guys say loan you want the bank to give you one million naira for a full year! Lol. Do you know what that means? Lol.

1mn is nothing, you can get it under 24 hours but what for? When a small business owner is given more than is required, he squanders the money. That's when he comes back to complain about high interest rate. There are lines open for them to enjoy, they should ask their account officers. I'll share some here when next I can.

amicable09:

I don't understand when people say interest rate to service loans are high. They are not.

SME right?
Instead of term loans, why don't they request for an OD line? There's what we call borrowing cause and borrowing purpose, they are both different. You sit with young business owners and ask them what they want and they go LOAN!

I met one today. 'Young man open an account with us'. His reply, "Will your bank give me loan?" and in my head I don't understand, loan? what for? Yes, an overdraft is a loan too but when you guys say loan you want the bank to give you one million naira for a full year! Lol. Do you know what that means? Lol.

1mn is nothing, you can get it under 24 hours but what for? When a small business owner is given more than is required, he squanders the money. That's when he comes back to complain about high interest rate. There are lines open for them to enjoy, they should ask their account officers. I'll share some here when next I can.

Dear OP. I appreciate your selflessness in addressing the matter of loans.
I've learnt a lot personally. I don't want to Google it but from a banker's perspective, what are OD loans?

I believe you know about DBN. but
I would like to contact you privately for a little financial advice. Eyes only.

Like I've been doing something all wrong.
Saw on the thread earlier that you don't have the password to the mail connected to this moniker. Have you been able to resolve it?

I really need to hear from you on my own matters. Eyes only

amicable09:

Oh! I know about this very well. But what's with the upper case 'cannot reject my request' , Lol. Don't be too sure. That's all I will say.

There's something called 'First Loss Payee' and 'Superior charge', by my association with guys in Legal department I understand these things. We have no problem with sharing asset with another bank but it is not as easy as you have written it. There's more to it than meet the eye. I won't accept such collateral except I will have Superior charge over the asset and mind you, it must be perfected!

Yes, u will have the first loss payee being the lender with the highest exposure. There is no way a bank with lesser exposure claim superiority over a security in the case of enforcement. If GT has 500million and first bank has 100 million, it is common sense for first bank to know GT has a higher claim should the case of enforcement ever comes to play.
Sharing of asset is not a biggie, as I've learned all U need is a good trustees and sides, once the lender is willing to share an asset, the KYC documents are complete, I see no reason why the trustee won't issue a letter of adequacy for disbursement.

Nevee:
Quite enlightening. So many opportunities exist in our Financial system. That's one place your money can sweat for you and make returns even while you are sleeping (and probably snoring) on your bed. But the information gap is just too wide.

I still feel if the general public have a proper knowledge of some of these opportunities, I doubt they would still be leaving their money lying fallow in commercial banks.

Please give us example of how our money can work hard for us

amicable09:

Let's go over that your "in all loan transactions" banks have the right to vary interest rate without recourse to the borrower... I don't know about other banks and I've not seen their offer letters but I've written CAM and I've done a few offer letters, I know that when it comes to pricing we always state it clearly that "it is subject to market conditions" so the customer is aware and if anything happens, we notify them in writing.

That's informing them beforehand.

Am not a banker but as I type, I have various loan agreements and offer letters from Zenith bank and GTbank before me (from 2012 to 2016).

Let me categorically state that there is no where any one of them mentioned in writing that the bank has a duty to pre-notify the customer in writing before interest rate reviews. They write you when its convenient for them and there is nothing you can do about it when they don't pre-inform you before the effective start date. Infact, the whole terms of the loan agreement are designed to make you have zero locus standi

44chux:


Am not a banker but as I type, I have various loan agreements and offer letters from Zenith bank and GTbank before me (from 2012 to 2016).

Let me categorically state that there is no where any one of them mentioned in writing that the bank has a duty to pre-notify the customer in writing before interest rate reviews. They write you when its convenient for them and there is nothing you can do about it when they don't pre-inform you before the effective start date. Infact, the whole terms of the loan agreement are designed to make you have zero locus standi

I was about to respond to correctguy's post when I saw your mention. Yours is pretty straight forward so let me address it first.

No offer letter or loan agreement will carry that information. However, all banks are mandated by CBN to notify their customers of interest rate review 10 days before. When we reviewed our rates in the not so distant past, Credit risk management penalized relationship managers who didn't present for filing acknowledgement copies of their letters to customers. It's that serious.

What your offer letters should carry is the information that interest rates are subject to market conditions. If there ever will be an upward or downward review, you'll be notified at least 10 days before the effective date.

LyfeJennings:


Yes, u will have the first loss payee being the lender with the highest exposure. There is no way a bank with lesser exposure claim superiority over a security in the case of enforcement. If GT has 500million and first bank has 100 million, it is common sense for first bank to know GT has a higher claim should the case of enforcement ever comes to play.
Sharing of asset is not a biggie, as I've learned all U need is a good trustees and sides, once the lender is willing to share an asset, the KYC documents are complete, I see no reason why the trustee won't issue a letter of adequacy for disbursement.

Lol. Your posts always make me laugh
No be only common sense. My bank has been in court for over 18 months with another bank over a property pledged as security by a customer. The Forced Sale Value (FSV) by valuators covers both banks exposure but the issue has been which bank should sell. Something as simple as ABC but Legal Department doesn't see it that way and the other bank has refused to budge too.

As the case lingers in court, in our books here, we are busy making provision for the bad loan instead of doing the commonsensical thing.

correctguy101:



Dear OP. I appreciate your selflessness in addressing the matter of loans.
I've learnt a lot personally. I don't want to Google it but from a banker's perspective, what are OD loans?

I believe you know about DBN. but
I would like to contact you privately for a little financial advice. Eyes only.

Like I've been doing something all wrong.
Saw on the thread earlier that you don't have the password to the mail connected to this moniker. Have you been able to resolve it?

I really need to hear from you on my own matters. Eyes only

First, I should apologize for using abbreviations when I've not written the word in full previously. I apologize. You owe me an apology too for thinking I should just know what DBN is by looking at the word even outside banking context

Overdraft (OD) is a short term loan (usually not more than 12 months). Of all forms of lending available to individual borrowers, I prefer overdraft facility more. It's always useful in cases where borrowers need to augment working capital, that is meet urgent need for cash. In overdraft, banks allow borrowers to draw money in excess of the credit balance in their current account. When I look at a customer's overdraft account balance it is usually in negative (debit) except the customer (he/she) has paid off.

For small business owners who sell on credit, they can use this line to make up for the financing gap that occurs between payment of staff salaries and when their debtors pay back. That you sold goods on credit doesn't mean your staff should be owed salaries, the business owner can draw from his account in zero to meet other financing needs.

I know Development Bank of Nigeria (DBN) has commenced on lending activities like BOI is doing. The thought of on lending just made me smile. So, I'm guessing the microfinance banks that they have signed on to disburse these funds through will have to provide Guarantee lines for their customers. Let's hope they agree to, otherwise they will use the money for other business activities and I don't blame them because bank guarantees are just as risky as any other form of lending available.

About my password, it hasn't been reset yet but I'll strive to get it sorted out this weekend. A lot of things taking my attention this weekend sha but my concentration will be restored soon

doenut:
Are you a startup or growing business?

Do you possess the next breakthrough idea, business solution or technology but struggling to get investment?

Talk to us at Accelera8tor.

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Contact privately if interested.

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Hello

Can I get your contact. Maybe phone number or email address.

Thanks

amicable09:

Lol. Your posts always make me laugh
No be only common sense. My bank has been in court for over 18 months with another bank over a property pledged as security by a customer. The Forced Sale Value (FSV) by valuators covers both banks exposure but the issue has been which bank should sell. Something as simple as ABC but Legal Department doesn't see it that way and the other bank has refused to budge too.

As the case lingers in court, in our books here, we are busy making provision for the bad loan instead of doing the commonsensical thing.

That's what I'm saying. The transaction that led to your bank being in court has no trustee in place hence there would be conflict of interest. The security pledged in that transaction would have been handed over to a trustee. The sharing formula would be captured in the "Trust Deed" & in the case of enforcement, the Trustee would be saddled with the responsibility of selling the asset and disbursed to both parties. U can make ur own independent research on this. I've seen cases of that nature, eventually the asset was sold far less than the FSV & each lenders for their portion as dictated by the trust deed. Infact, each lender didn't get up to their actual exposure.

Madam Banker, BE HUMBLE. NOBODY SABI EVERYTHING. DO YOUR RESEARCH. Guys in ur legal team might not even have an actual experience of what this is. I have been in transactions of this nature and I can tell U this I know.

doenut:
Are you a startup or growing business?

Do you possess the next breakthrough idea, business solution or technology but struggling to get investment?

Talk to us at Accelera8tor.

Funds available for business growth in exchange for equity and mentoring.

Contact privately if interested.

Thanks

Kindly DM me ur contact

amicable09:

First, I should apologize for using abbreviations when I've not written the word in full previously. I apologize. You owe me an apology too for thinking I should just know what DBN is by looking at the word even outside banking context

Overdraft (OD) is a short term loan (usually not more than 12 months). Of all forms of lending available to individual borrowers, I prefer overdraft facility more. It's always useful in cases where borrowers need to augment working capital, that is meet urgent need for cash. In overdraft, banks allow borrowers to draw money in excess of the credit balance in their current account. When I look at a customer's overdraft account balance it is usually in negative (debit) except the customer (he/she) has paid off.

For small business owners who sell on credit, they can use this line to make up for the financing gap that occurs between payment of staff salaries and when their debtors pay back. That you sold goods on credit doesn't mean your staff should be owed salaries, the business owner can draw from his account in zero to meet other financing needs.

I know Development Bank of Nigeria (DBN) has commenced on lending activities like BOI is doing. The thought of on lending just made me smile. So, I'm guessing the microfinance banks that they have signed on to disburse these funds through will have to provide Guarantee lines for their customers. Let's hope they agree to, otherwise they will use the money for other business activities and I don't blame them because bank guarantees are just as risky as any other form of lending available.

About my password, it hasn't been reset yet but I'll strive to get it sorted out this weekend. A lot of things taking my attention this weekend sha but my concentration will be restored soon

Sorry ma'am, I just assumed you would be aware of DBN. and it turns out you are.

I know about overdrafts but didn't know it's called OD .

Thanks for the heads up. I really wish you would let me know when you get your mail handy again. Or if there's another way to get my worries through to you.

amicable09:

First, I should apologize for using abbreviations when I've not written the word in full previously. I apologize. You owe me an apology too for thinking I should just know what DBN is by looking at the word even outside banking context

Overdraft (OD) is a short term loan (usually not more than 12 months). Of all forms of lending available to individual borrowers, I prefer overdraft facility more. It's always useful in cases where borrowers need to augment working capital, that is meet urgent need for cash. In overdraft, banks allow borrowers to draw money in excess of the credit balance in their current account. When I look at a customer's overdraft account balance it is usually in negative (debit) except the customer (he/she) has paid off.

For small business owners who sell on credit, they can use this line to make up for the financing gap that occurs between payment of staff salaries and when their debtors pay back. That you sold goods on credit doesn't mean your staff should be owed salaries, the business owner can draw from his account in zero to meet other financing needs.

I know Development Bank of Nigeria (DBN) has commenced on lending activities like BOI is doing. The thought of on lending just made me smile. So, I'm guessing the microfinance banks that they have signed on to disburse these funds through will have to provide Guarantee lines for their customers. Let's hope they agree to, otherwise they will use the money for other business activities and I don't blame them because bank guarantees are just as risky as any other form of lending available.

About my password, it hasn't been reset yet but I'll strive to get it sorted out this weekend. A lot of things taking my attention this weekend sha but my concentration will be restored soon

Hello, happy Sunday to you.

Can you please break down the concept of "Cheque Kitting" to me, i.e In simple terms.

Thanks.

obami007:


Hello

Can I get your contact. Maybe phone number or email address.

Thanks

mmnltobi@yahoo.com

Fkforyou:


Hello, happy Sunday to you.

Can you please break down the concept of "Cheque Kitting" to me, i.e In simple terms.

Thanks.

Boy! Busy bee me!

The Sunday I got your mention, in my head, I replied immediately o and my response was a funny one. Your question reminded me of a guy who asked about money laundering on this forum some months back. It's a suspicious question to be asked in public because it is a crime and there is almost no simple terms to explain it.

Because I don't want to teach you how check fraud is committed, I'll just say it is no longer very common since clearing takes T+1 nowadays. That is, transaction day plus one which is two days. AND, there's the non dud cheque pledge you must sign if you have a checking account/current account. The issue of 'bounced' cheque is not taken lightly at all these days. So, diss the concept.

nahzyla:
Good day everyone. I am a bit cash strapped at the moment and due to certain circumstances I can only work from home for now. If you have any good ideas for online businesses please suggest to me, I need money for me and some family members.
Something I can do from my phone or system. Please I really need help on online jobs that are profitable from those who have tried and trusted them, thanks.

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On the issue of varying interest rate based on market conditions.
Interest rate on term loans are always increasing.
But banks do inform their customers in writing if there is change in interest rate.

amicable09:

Boy! Busy bee me!

The Sunday I got your mention, in my head, I replied immediately o and my response was a funny one. Your question reminded me of a guy who asked about money laundering on this forum some months back. It's a suspicious question to be asked in public because it is a crime and there is almost no simple terms to explain it.

Because I don't want to teach you how check fraud is committed, I'll just say it is no longer very common since clearing takes T+1 nowadays. That is, transaction day plus one which is two days. AND, there's the non dud cheque pledge you must sign if you have a checking account/current account. The issue of 'bounced' cheque is not taken lightly at all these days. So, diss the concept.

Lol...

So you answered me in your head?

Anyway, thank you.

I was actually reading it against exams, it didn't stick.
I just needed a simple straightforward explanation to it.

Fkforyou:


Lol...

So you answered me in your head?

Anyway, thank you.

I was actually reading it against exams, it didn't stick.
I just needed a simple straightforward explanation to it.

Ah! If my memory serves me right, I remember you were in a bank race. Looks like you're in training school now. Congratulations

I have a coursemate and friend in the same training school. Wishing you success in all your exams

Let me know if you need anything I can help with. I'll willingly oblige.

Please send us an email at corporateafricanfoodsltd@gmail.com we have some bank and we could use your expertise.

amicable09:

Ah! If my memory serves me right, I remember you were in a bank race. Looks like you're in training school now. Congratulations

I have a coursemate and friend in the same training school. Wishing you success in all your exams

Let me know if you need anything I can help with. I'll willingly oblige.

Yes, I am.

I will definitely do that....Thank you.

Lincolnburrows:

You must wait for a bank. Why not go into a partnership with someone. I will be willing to listen to your ideas.

Can i discuss my idea with you?
Its actually an already started up business lookinh for expansion